* Income from oil sales amounted to TSEK 21,470 (24,155) * The net result after tax for the period was TSEK -118,448 (-812) * EPS was SEK -0.35 (-0.00) for the report period * Malka Oil proposes and carries out the financial restructuring * Convertible bond holders accept a proposal for early conversion and an Extraordinary general meeting in Malka Oil AB approves the board of director's decision for a rights issue and an early conversion of the convertible bonds which were executed at the end of April MD's Report Dear Shareholders, Please allow me to start with mentioning two circumstances that are both positive for Malka. Firstly, after having completed a financial reconstruction and a subsequent rights issue our interest bearing debt burden has decreased significantly and resulted in a high solidity which, if we act wisely, can give the Company larger freedom of action for the future. Secondly, the ongoing operational efficiency program has resulted in that we for the first time in April and under normal operational conditions, i.e. before the recent disturbing actions in the oil fields and an international oil price above USD 45 per barrel, have a positive cash flow in the Company. However, on the other side the inflamed owner conflict that has been going on lately has consumed significant resources and a lot of management focus which has been diverted from running the business. The non-sanctioned actions that have been conducted on the oil fields have also disturbed production which has fallen to around 1,000 barrels per day from earlier 2,500. Intensive work is being made to reach a solution that enables a normalisation of the business. The main reason behind this unfortunate development is related to the largely completed debt restructuring in Russia. Provocative and destructive actions have caused Malka damage and are not, according to our opinion, in conjunction with good business practices. Instead, the negotiation table would have been a better arena to establish a constructive solution. Malka is, as earlier communicated, in progress of fulfilling its part of an already concluded agreement. This is now happening step by step and depending on the reactions from other parties involved, it is our wish to return to "business as usual" as soon as possible. On a macro level, there are also external lights in the dark, primarily the recovery of the oil price and to a certain extent of the Russian financial markets. These two factors were against us during the second half of last year and even as late as in January this year we experienced a negative contribution per barrel as a consequence of a domestic Russian oil price at around USD 10 per barrel. The price of oil has since then gradually increased during the spring and Brent was traded at levels above USD 60 per barrel in May. This development is of course both unsure and volatile and therefore it is fundamentally important to continue to focus on increasing the efficiency of the production and the activities in the oil fields and on cost control throughout the Company. Unfortunately we also have to accept that the production and the increase of reserves have not met our earlier established targets. With an increasing oil price it will be a priority to increase production from existing wells. We are continuously monitoring the profitability of each well. Currently, nine wells are producing and the others put into conservation. With existing wells we have a technical capacity of up to 4,000 barrels per day when all wells are performing and producing. For further production increases we need to drill new wells and therefore the drilling program is being reviewed. Important factors in this review are the new seismic report from the north and middle part of the license block as well as the knowledge we have gained through existing drilled wells and production data. An updated independent western reserve report by the American petroleum consulting company DeGolyer and MacNaughton (D&M) which is taking into account these new factors is planned to be produced latest during the third quarter this year. Due to the delays in both production and reserve development since spring 2008 in combination with new data, we are also planning to review the long term targets of the Company both related to production and reserves and their timing. Our earlier communicated operational plan is still valid - as we await higher oil prices we will minimise exploration drilling and optimize production to levels that still comply with license obligations. The aim is to maximize the existing positive cash flow based on existing production and connect more wells step by step when profitability can be shown. Generally speaking we also see a big value in doing what has to be done to achieve normal and peaceful working conditions in the Company. At times this can seem complex but also necessary to be able to focus all resources on what is beneficial for us all - to find, produce and sell oil. Stockholm May 29, 2009 Fredrik Svinhufvud Managing Director Malka Oil AB Comment on the Group's result and financial position Turnover and result Operating income for the report period amounted to TSEK 21,489 (TSEK 26,579), of which revenues from oil sales were TSEK 21,470 (TSEK 24,155). Gross profit amounted to TSEK -8,588 (TSEK -323). This amount includes an amortization charge of TSEK 6,383 (TSEK 2,277). Selling and distribution expenses were TSEK -966 TSEK (TSEK -5,878). These expenses have decreased significantly compared to earlier report periods following the conclusion in early 2009 of a new contract with Tomskayaneft for treatment and pumping of produced oil into Transneft's system. As a result of the new contract, the volume based charge paid to Tomskayaneft has been significantly decreased. Operating profit for the quarter amounted to TSEK -28,378 (TSEK -13,393). Transaction costs of TSEK -1,429 (TSEK -450) relating to new share issues in previous report periods have been booked directly against equity. Net financial items for the period January-March 2009 were TSEK -78,084 (TSEK 14,824). The predominant proportion of the calculated net financial items amount consists of currency exchange rate losses with no impact on cash flow. Exchange rate developments have had a negative impact on net financial items during the period both as a result of the depreciation of SEK versus USD and as a result of the depreciation of RUR versus USD. Exchange rate losses have arisen on the outstanding USD denominated convertible loans due to the depreciation of SEK versus USD. Exchange rate losses have also arisen on the USD lending to the Group's Russian subsidiaries due to the exchange of these loans into RUR whose depreciation versus the USD has been even larger than the depreciation of SEK versus USD. During the quarter, the SEK depreciated versus the USD by approximately 4.5 % while the RUR depreciated versus the USD by approximately 11.1 %. The tax cost for the period amounted to TSEK -11,986 (TSEK -2,243). This amount includes a dissolution of deferred tax assets in the Russian subsidiaries of TSEK 12,527 which has impacted the Group's result negatively. This dissolution does not have any impact on cash flow. The Group reports a net result after tax for the 1 January - 31 March 2009 period of TSEK -118,448 (TSEK -812), equivalent to an earnings per share of SEK -0.35 (SEK 0,00). Investments Investments in tangible and intangible fixed assets in the Group during the period January - March 2009 amounted to TSEK 9 271 (122 579 TSEK), of which investments in intangible fixed assets represented TSEK 6 268 (TSEK 119 580 TSEK). The limited investment activity during the quarter reflects the company's difficult financial situation during the period as a result of the dramatic fall in the oil price and the problems in the financial markets in Russia and globally. Financing and liquidity In the beginning of 2009, the company's financial situation was very difficult and the board of directors made a proposal for a financial restructuring as a way to solve the financing requirements of the Group. The proposal consisted of two parts: - an offer to holders of convertible bonds of early conversion into shares of the two outstanding convertible bond loans of nominally MUSD 80; - a new rights issue under the special condition that the convertible bond owners must accept their offer in full for the rights issue to go through. The convertible bond holders accepted the offer of early conversion at the convertible bond holders' meeting on February 27. This meant that Malka Oil's outstanding convertible bond debt of a total amount of MUSD 80 would be converted into Malka Oil shares conditional of an approval of the proposal at an extraordinary general meeting of shareholders and under the condition that the upcoming rights issue would be fully subscribed. At an extraordinary general meeting of shareholders on March 17, the proposal regarding early conversion of the company's convertible bond debt into shares was approved. In addition, it was decided to execute a rights issue which would provide the company with an amount of approximately MSEK 141 before issue expenses. The conversion of the convertible bond loan and the rights issue would according to the decisions be executed in April 2009. See further below in "Major business events following the end of the report period". Cash balances in the Group amounted to TSEK 5,377 (TSEK 57,124) as of March 31, 2009. Legal disputes Malka Oil's Russian subsidiary, OOO STS-Service, is involved in legal disputes with local suppliers. Negotiations regarding these disputes are going on between the parties and the board of directors in Malka Oil sees no need for further provisions due to these disputes. Employees The number of employees in Group companies at the end of the report period was 223 (99) persons, of which 35 (11) were women and 188 (88) were men. Operations Summary Malka Oil AB is an independent Swedish oil and gas company within exploration and production active in Tomsk region in western Siberia in Russia. The subsidiary OOO STS-Service owns an oil licence valid for 25 years as from April 2005, which gives the company the right to extract all hydrocarbons found within the Tomsk licence block during the licence period. The licence block measures just over 1,803 square kilometres, corresponding to an area of approximately 30 times 60 kilometres and is located in the very active oil and gas producing north-western part of the Tomsk region. The licence block is surrounded by a large number of established producing oil and gas fields. Drilling on the licence block commenced during the Soviet era. The Soviet authorities drilled four boreholes, three of which were discovered to produce hydrocarbons, i.e. oil, gas and gas condensate. A vast amount of 2D seismic data was collected which indicated a volume of approximately one million tons (which is about eight million barrels) of recoverable oil reserves classified in accordance with Russian categories "Proven" (C1) and "Probable" (C2). Besides the three oilfields that are currently establish in the licence block, Malka Oil has, based on existing seismic data, identified another seven structures, i.e. potential oil fields. A further important dimension that indicates additional potential in Malka Oil's licence block is that there was no seismic data for approximately a third of the licence block and the data acquisition for this area was completed during spring 2008. After two seasons of seismic data gathering and interpretation, Sibneftegeofizika, a reputable Siberian oil service company has presented a seismic report covering Malka Oil's license block nr 87 in the Tomsk region. This new report demonstrates four new potential oil bearing structures in addition to the seven communicated earlier. These will be subject to exploration drilling over the next few years. For further information, please contact: Fredrik Svinhufvud, MD, tel +46 8 5000 7811, mobile +46 708 708 708 Jan-Olov Olsson, CFO, tel +46 8 5000 7812, mobile +46 768 51 86 92 For further information on Malka Oil AB, see the website www.malkaoil.se (for complete report see attached file)